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South America Soybean Crop to Slide on Drought, Oil World Says

South America soybean production is expected to fall 2.9 percent after dryness and heat damaged crops in Brazil and Paraguay and as conditions deteriorate in Argentina, Hamburg-based industry researcher Oil World said.

Total output for Brazil, Argentina, Paraguay, Uruguay and Bolivia will slide to 132.7 million metric tons in 2011-12 from 136.7 million tons a year earlier, 4.3 million tons less than forecast in December, Oil World wrote in an e-mailed report.

Soybean futures rose 6.8 percent in Chicago trading in December, the oilseed’s best monthly performance since August, amid concern dry weather will curb soybean crops in Brazil and Argentina, the largest exporters behind the U.S.

“Favorable rainfall would still result in a recovery of soybean and corn-crop prospects in Argentina,” Oil World wrote. “Maturation is well advanced in most Brazil and Paraguay, where the crops already suffered irreversible damage.”

The soybean crop in Brazil will probably drop to 71 million tons from 75.3 million tons in 2010-11, Oil World said, cutting its forecast by 1.8 million tons. Paraguay’s production will fall to 7 million tons from 8.37 million tons, the researcher said, lowering its outlook by 1.5 million tons.

“In some parts of Brazil the corn and soybean crops are almost mature, so that rainfall from now on will partly be too late and probably even detrimental for harvesting,” Oil World said. “The same is true for Paraguay.”

Brazil Soybeans

The researcher said Brazilian soybean production may turn out to be 1 million to 2 million tons below its forecast, while Paraguay’s harvest may also come in lower than its estimate.

Argentina’s soybean harvest is forecast to rise to 51 million tons from 49.4 million tons a year earlier, Oil World said, cutting its outlook by 1 million tons. The outlook requires “above-normal” rainfall soon, the researcher said.

“In Argentina rainfall in January and February would still be very beneficial,” Oil World said. “There are significant moisture deficits in most parts of Argentina and there is a high risk that the required rainfall does not arrive in time to prevent additional irreversible damage.”

Parts of Argentina and south Brazil were forecast to have dry and hot weather early this week, causing crop stress for corn and soybeans, AccuWeather Inc. said in a Dec. 30 report.

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